Production keeps pressure on prices

KANSAS CITY, Mo. — Headwinds hit the soybean market, pulling prices below the $10 mark to a four-year low, driven by abundant supply and relatively low demand reflected in the U.S. Department of Agriculture’s Aug. 12 reports.

A rundown of the bearish crop production and supply and demand reports was provided by Arlan Suderman, StoneX chief commodities economist, after the numbers were rolled out that included record corn and soybean yields.

Soybeans took a hit upon release of the reports. What did the USDA tell us about the numbers?

Suderman: Soybeans came in a 53.2 bushels per acre, up 1.2 bushels from the previous month and about 0.7 bushels above what the trade was expecting. So, producing really bigger crops with expectations of bigger crops yet to come.

The soybeans harvested acreage increase by 1 million acres, really making it that much worse. So, you get a higher yield and higher harvested acreage for soybeans. That pushed ending stocks for the 2024-2025 marketing year to 560 million bushels.

It could have been worse, but USDA increased exports by 25 million bushels even though this is one of the slowest starts to the export season that we’ve seen on many years. USDA is trying to hold the line, but it still put ending stocks at 560 million bushels.

USDA projected the domestic corn supply to increase by 2%, with a larger carry-in offsetting smaller crops. Corn went below $4 per bushel in late July for the first time since October 2020 and the pressure continues. So, what about corn?

Suderman: The corn yield came in a bushel above what the trade was expecting and 2.1 bushels per acre above what it was in July. So, the market will assume big crops get bigger, and when you look at the August weather so far and the forecast for the rest of August, it’s hard to argue with that at this point.

We did see corn acreage drop in specifically what matters — harvested acres — dropping by 700,000 acres for corn. That helped offset to some extent the higher yield.

The good news on the corn number is we saw corn ending stocks and 2.073 billion bushels. That was 23 million below the trade expectations even though we had the bearish surprise on the yield and the trade is delighted with that. So, they’re buying corn and the expense of soybeans.

Any big numbers stand out in the world estimates?

Suderman: USDA did cut European Union wheat production by 2 million metric tons, and I think they’ve got more to go there. They added almost 2 million metric tons back to Ukraine after they underestimated the wheat production there. So, that kind of wiped those numbers out.

It still leaves world wheat ending stocks for the new marketing year at 256.6 million metric tons, which is pretty much where the trade expected it and down slightly from last month.

Global soybean ending stocks for the new marketing year jumped to 134.3 million metric tons, up from 127.8 million metric tons last month and up from the 128 million metric tons expected by the trade.

Overall, what are your key takeaways from the crop production and supply and demand reports?

Suderman: The trade continues to be focused on the supply side of the balance sheet and they generally tend to continue to do that until they have a handle on how big the crop might be.

As long as those yields are going up, the trade is not going to feel comfortable of how big these crops might be considering the August weather until we see the September report or start seeing harvest results.